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Gas Prices Climb. Housing Stalls. Can Air Travel Get Worse? · The Financial Exchange Show

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Speaker 2: Chuck, Paul and Tucker with you here. And if you
1:13
Speaker 2: didn't like yesterday's price action in markets, the good news
1:17
Speaker 2: is that today exists because it's basically the mirror image
1:22
Speaker 2: of what we saw yesterday. UH stocks responding a little
1:25
Speaker 2: bit more firmly to the top side. But we've got
1:27
Speaker 2: the S and P five hundred up fifty three points
1:29
Speaker 2: right now, the Dows up four hundred and fourteen, nasdak
1:32
Speaker 2: can posit up two hundred and sixty one, So green
1:35
Speaker 2: on all your major US indices taking a little good
1:38
Speaker 2: bonds ten year treasury sold off yesterday, getting bid back
1:42
Speaker 2: up today, down six point eight basis points to four
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Speaker 2: point three two four percent. Dollar Index basically holding flat
1:48
Speaker 2: at ninety nine to twenty down point zero four percent. Gold,
1:52
Speaker 2: which has gotten you know, crushed repeatedly over the last
1:56
Speaker 2: few weeks, up one hundred and sixty four dollars announced
1:59
Speaker 2: to forty five six today. And we've got crude oil
2:02
Speaker 2: West Texas Intermedia down three forty three a barrel to
2:05
Speaker 2: eighty eight ninety two. This on optimism that there's gonna
2:10
Speaker 2: be some kind of solution to what's been going on
2:14
Speaker 2: in the Middle East for the last almost four weeks.
2:16
Speaker 2: Now in the near future. Again, if you're just tuning
2:21
Speaker 2: into our show for you the first time, or you know, you're,
2:23
Speaker 2: you know, kind of looking for our thoughts on things there,
2:27
Speaker 2: my general view remains the same. I don't know exactly
2:31
Speaker 2: how negotiations are going. I hope they're going well, but
2:34
Speaker 2: each side is telling you completely different things, and the
2:37
Speaker 2: truth is probably somewhere in the middle, but we don't
2:40
Speaker 2: know exactly where, and so I remain focused not on
2:44
Speaker 2: what each side is saying, but rather on what is
2:46
Speaker 2: actually happening. And to this point, the straight up Hoore
2:48
Speaker 2: Moves remains largely closed, with traffic now down, you know,
2:52
Speaker 2: ninety five to ninety seven percent. There are a few
2:54
Speaker 2: boats that are getting through with the permission of the
2:57
Speaker 2: Iranians at the moment, and you continue to see awful
3:00
Speaker 2: lot of fighting going on and more US troops inbound.
3:04
Speaker 2: So at this point optimism that things get better. I
3:08
Speaker 2: do think it's fair to say like things have not
3:10
Speaker 2: worsened in the last week, you know, I think we
3:13
Speaker 2: kind of hit the peak of how bad things were
3:16
Speaker 2: last Wednesday, when that was when you had the strikes
3:21
Speaker 2: on the South pars Gas field and the what's the
3:26
Speaker 2: big Qatar refinery Razlafan. I think it is those both
3:30
Speaker 2: got hit on that day and things have you know,
3:32
Speaker 2: tamped down a little bit since then, So I do
3:35
Speaker 2: think it's safe to say, hey, things have not continued
3:37
Speaker 2: to escalate any further, and that's a good situation. But
3:41
Speaker 2: the problem is that you still don't have anything meaningful
3:44
Speaker 2: flowing through horror moves, and that's going to be a
3:47
Speaker 2: problem for as long as it continues. Yeah.
3:49
Speaker 3: I would say the concerns probably ticked up on Saturday
3:52
Speaker 3: evening when President Trump had mentioned potentially going after some
3:57
Speaker 3: areas and IRMA then backed away from that. But yeah,
4:00
Speaker 3: in general, largely speaking, there has been I guess less
4:06
Speaker 3: news this week on that front, which is a positive.
4:09
Speaker 2: Let's talk a little bit about gas price is triple
4:12
Speaker 2: a national average for gas right now at three ninety
4:15
Speaker 2: eight and three tenths, up six tens of percent overnight,
4:19
Speaker 2: diesel up another two cents overnight to five thirty six
4:22
Speaker 2: and six tenths. But there's a piece from Barns think
4:25
Speaker 2: gas prices are high now braced for more sticker shock
4:28
Speaker 2: And the answer is maybe. And I say maybe because
4:32
Speaker 2: based on where gasoline futures are now, you know, kind
4:35
Speaker 2: of holding based on where oil futures are. If you
4:39
Speaker 2: can somehow keep oil under one hundred a barrel on
4:43
Speaker 2: West Texas Intermediate, you're probably getting pretty close to the peak.
4:49
Speaker 2: You know. If you get back to one hundred again,
4:51
Speaker 2: we're at eighty eight and changed today. You get back
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Speaker 2: to one hundred, you're probably looking at like four fifteen
4:55
Speaker 2: to four to twenty a gallon. But the case for
5:00
Speaker 2: you know, gas prices moving up is, look, if Hormus
5:03
Speaker 2: remains closed for any extended period of time, there are
5:09
Speaker 2: viable paths to gas going north of five and potentially
5:12
Speaker 2: even six dollars a gallon. That's if fore MOUs remains
5:15
Speaker 2: close for an extended period of time. I don't know
5:17
Speaker 2: if that's gonna happen. It could be that you've already
5:20
Speaker 2: seen the worst of gas prices. It doesn't mean that
5:23
Speaker 2: they're necessarily heading back down below three a gallon anytime soon.
5:28
Speaker 2: I think there's a really tough putt to get there
5:31
Speaker 2: in the next twelve to eighteen months, just based on
5:34
Speaker 2: the damage to facilities throughout the Middle East and what
5:39
Speaker 2: will happen with you know, supply and demand on the
5:41
Speaker 2: back end of this. So I don't think you have
5:44
Speaker 2: a pass back towards like two to eighty a gallon
5:47
Speaker 2: anytime soon on a national basis. But I'm also not
5:51
Speaker 2: sitting here saying you're definitively going to five or six
5:54
Speaker 2: dollars a gallon, because I don't know where you're gonna
5:57
Speaker 2: be in a month. There's a case to be made where, hey,
5:59
Speaker 2: if these ne gociations, you know, were successful, maybe there's
6:02
Speaker 2: improvement over the next couple of weeks. There's a case
6:05
Speaker 2: to be made that, hey, maybe both sides are you know,
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Speaker 2: not really negotiating and just trying to buy time for
6:10
Speaker 2: whatever they want to do next. And if that's the
6:12
Speaker 2: case and Hormuz is still closed in May, yeah you
6:16
Speaker 2: could see five dollars a gallon there. But I don't
6:18
Speaker 2: have any clue which way we're gonna go, And I'm
6:21
Speaker 2: I'm not afraid to admit that I don't. I don't
6:23
Speaker 2: have to be one of these people being like, hey,
6:25
Speaker 2: things are gonna get worse er, yo, things are gonna
6:28
Speaker 2: get better. Like sometimes it's okay to just say you
6:31
Speaker 2: don't know and not know.
6:33
Speaker 3: If you don't know, now you know the the area
6:37
Speaker 3: that I've been just trying to focus on as it
6:39
Speaker 3: pertains to gas, because there is a piece here in
6:41
Speaker 3: the Wallstreet Journal that covers how Americans are dealing with
6:44
Speaker 3: how our energy costs, And in particular, the area of
6:47
Speaker 3: focus that I've looked at is what impact that has
6:51
Speaker 3: on consumer spending. And I was trying to look back
6:53
Speaker 3: in twenty twenty two, and that's not a great proxy
6:55
Speaker 3: just because there was so much cash flush kind of
6:58
Speaker 3: sitting around at that point in time. But obviously, from
7:01
Speaker 3: a simplistic standpoint to listeners out there, what higher energy
7:05
Speaker 3: costs mean, particularly for lower income families, those are the
7:08
Speaker 3: ones that really it hurts them the most. It just
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Speaker 3: leaves less money for disposable income, for discretionary income to
7:15
Speaker 3: be spent over a period of time.
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Speaker 2: You know, does four.
7:19
Speaker 3: Dollars a gallon necessarily mean that we see a plumbinay
7:23
Speaker 3: of consumer spending.
7:24
Speaker 2: Not necessarily.
7:25
Speaker 3: I do think on those lower income folks, we will
7:27
Speaker 3: see it in short order here over the next few months,
7:29
Speaker 3: and it particularly if it lingers on into the summer,
7:32
Speaker 3: then you have sort of peel back on some of
7:34
Speaker 3: those road trips and things like that. But there is
7:36
Speaker 3: not a one to one correlation. Of Hey, gas prices
7:40
Speaker 3: are up, it does make up a small percentage of
7:43
Speaker 3: overall budget. Again, for those people who are living paycheck
7:46
Speaker 3: to paycheck, it is substantial. And then there is the
7:50
Speaker 3: other trickle down impacts of course that we talked about
7:52
Speaker 3: a little bit earlier in the show, that transportation costs
7:56
Speaker 3: are going to go up, food prices go up, and
7:58
Speaker 3: goods delivery goes up just because the input cost on
8:01
Speaker 3: the energy front increase there. But it'll be interesting to
8:04
Speaker 3: see sort of what we see from the impacts on
8:08
Speaker 3: the consumer the longer this persists.
8:11
Speaker 2: Let me ask both of you, any behavioral changes on
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Speaker 2: either of your sides as a result of higher gas prices.
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Speaker 3: Yeah, I got I have oil at the house, and
8:22
Speaker 3: uh had forgotten that of avocado? What kind I've got?
8:27
Speaker 2: Don't ask me.
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Speaker 3: Jeez, there goes my mic Don't ask me on those
8:31
Speaker 3: because we all know my grocery store acumen or food
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Speaker 3: acumen is is low. But what I but I do know,
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Speaker 3: is that I had locked in a pricing plan with
8:41
Speaker 3: my energy provider.
8:43
Speaker 2: I hope you know.
8:44
Speaker 3: I don't think I had signed the paperwork, but it's
8:46
Speaker 3: it's locked in and I'm really going to make sure,
8:49
Speaker 3: really going to make sure that I get that last
8:51
Speaker 3: delivery right now, Paul. So uh, I'm going to make
8:58
Speaker 3: sure that I get that last because it expires at
9:01
Speaker 3: the end of April. And that is something I never
9:04
Speaker 3: would look at before. But it is a behavior that's changed.
9:07
Speaker 3: Where I said, all right, I wonder what my pricing
9:10
Speaker 3: plan looks like, and I have one more delivery to go.
9:13
Speaker 3: I'm going to make sure that that gets filled up
9:15
Speaker 3: before that lapses in April.
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Speaker 2: Talk what about you.
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Speaker 4: I have no real behavioral changes in terms of gas
9:23
Speaker 4: because I have to drive here five times a week.
9:26
Speaker 4: So it is what it is, you know, so deal
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Speaker 4: with it.
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Speaker 2: I'll tell you what what I've personally been doing. My
9:31
Speaker 2: normal gas filling up behavior is I prefer to wait
9:35
Speaker 2: as long as possible basically until like the you know,
9:38
Speaker 2: the light goes on, and then fill up just because
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Speaker 2: I prefer not to go to the gas station. If
9:43
Speaker 2: all else being equal, it's just a waste of time.
9:45
Speaker 2: You're honest.
9:46
Speaker 4: You round half a tank now as a result. What's
9:48
Speaker 4: that you round half a tank now to refill up?
9:51
Speaker 4: As a result.
9:52
Speaker 2: Basically, anytime I pass a station that I see with
9:55
Speaker 2: a good price, I fill up. Now it might be
9:57
Speaker 2: every like depending on the path I'm taking, because the
10:00
Speaker 2: price of gas has been rising, and I'm like, hey,
10:02
Speaker 2: if I fill up today, I granted, it's like I'm
10:06
Speaker 2: saving like ten cents maybe fifty cents per you know
10:10
Speaker 2: trip when it's all said and done. So, like it's
10:12
Speaker 2: around the edges. Now that prices have stabilized in this
10:16
Speaker 2: region for a little bit, I'm not going to be
10:18
Speaker 2: quite as aggressive. But again, we'll have to see how
10:21
Speaker 2: things develop, and if we're still sitting here in the
10:23
Speaker 2: same situation a week and a half from now, yeah,
10:25
Speaker 2: I probably start, you know, saying, Okay, if you pass
10:28
Speaker 2: the station with good prices, I'm gonna fill up, because
10:30
Speaker 2: I don't know, like I'm I'm gonna hedge that way.
10:34
Speaker 2: Like that's kind of how I'm working.
10:35
Speaker 3: I've done a little bit of that too, much more
10:36
Speaker 3: focus on looking at what station I stop at where
10:39
Speaker 3: previously it's a little bit more convenience focus.
10:42
Speaker 2: Yeah, so that's kind of been the state of play
10:46
Speaker 2: for me. Is like you, Tucker, My my driving almost
10:49
Speaker 2: exclusively consists of to and from work, So you know,
10:53
Speaker 2: there's a piece in the Wall Street Journal about like, oh,
10:55
Speaker 2: people are canceling road trips. First of all, who goes
10:58
Speaker 2: on a road trip in March?
11:01
Speaker 4: Not a lot of people.
11:02
Speaker 2: I guess if you're in like college on spring break,
11:04
Speaker 2: like heading down to Florida, I could buy that. But
11:07
Speaker 2: March is not like a great hospitable time to be like, Hey,
11:11
Speaker 2: it's March, you want to go see the country? I
11:14
Speaker 2: mean no, I'd rather wait till the weather's better.
11:16
Speaker 4: You're not considering like ninety minutes to two hours a
11:19
Speaker 4: road trip, are you?
11:19
Speaker 2: No?
11:20
Speaker 4: Like, yeah, a road trip for me five plus hours?
11:23
Speaker 2: Yeah, road trip's got to be at least five hours
11:26
Speaker 2: in my opinion. Anything less than that. It's just like
11:29
Speaker 2: a trip that happens to be on a road, not
11:31
Speaker 2: a road trip. Your mileage may Vary's take a quick
11:36
Speaker 2: break when we return. Let's see, we've got trivia coming up.
11:41
Speaker 2: That'll be fun do. Let's talk a little bit about
11:43
Speaker 2: the housing market and what we are seeing there. We're
11:47
Speaker 2: right in the middle of the spring housing season right now.
11:50
Speaker 2: What's the deal? We'll tell you after this.
11:53
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13:28
Speaker 2: Every week on Wednday Wednesdays, the Mortgage Bankage Association puts
13:32
Speaker 2: out their numbers for basically what is going on with
13:37
Speaker 2: mortgage demand in the United States at the moment, UH
13:41
Speaker 2: Mortgage applications UH dropped by ten and a half percent
13:44
Speaker 2: week over week. In particular, the much more highly sensitive
13:49
Speaker 2: refinance index fell about fifteen percent. The purchase index fell
13:55
Speaker 2: by about five percent. And this is right as we
13:58
Speaker 2: are entering into the peak of the spring home buying season.
14:02
Speaker 2: I generally think at this point, because it's kind of
14:05
Speaker 2: stretched out a little bit, it really starts in kind
14:09
Speaker 2: of right after the Super Bowl and it runs through
14:14
Speaker 2: call it take your pick of either Memorial Day or
14:18
Speaker 2: Father's Day, like you know, kind of end of May
14:20
Speaker 2: early June is kind of when it peaks. But really
14:24
Speaker 2: the if you look at just from a volume perspective,
14:27
Speaker 2: it's basically April and May are like the big part
14:31
Speaker 2: of it. And so with mortgage rates having moved up
14:35
Speaker 2: over the last I don't know month or so, now
14:40
Speaker 2: you're pretty much looking at a situation where rates are
14:44
Speaker 2: up about half a percent during that time and trying
14:48
Speaker 2: to see is that going to have an impact on
14:51
Speaker 2: the spring housing market.
14:53
Speaker 3: If we looked last year, I believe we were sitting
14:55
Speaker 3: maybe six seventy five or so, so slightly down from
14:59
Speaker 3: last year. But as you mention, I think we had
15:01
Speaker 3: eclipse just below six percent at one point, probably at
15:04
Speaker 3: the end of February would be my guest there. It'll
15:06
Speaker 3: be interesting to see do.
15:08
Speaker 2: You mean seven last sorry, this is.
15:11
Speaker 3: The lowest end we got, was like right below six.
15:14
Speaker 3: And then last year at this time I think we
15:16
Speaker 3: were six seven five or something like that, so you know,
15:19
Speaker 3: more or less within the same range. It did feel
15:21
Speaker 3: like for a few weeks there there was some momentum
15:23
Speaker 3: that we would get into the mid fives area and
15:25
Speaker 3: that would perhaps maybe juice some of the activity that
15:29
Speaker 3: we would see on the real estate front side of things.
15:32
Speaker 3: But I don't really know if there clearly is not
15:36
Speaker 3: going to be a catalyst from an interest rate perspective
15:38
Speaker 3: that is going to get a lot of buyers out there.
15:41
Speaker 3: It still looks like we are set for more of
15:43
Speaker 3: a a tepid real estate market at the moment, but
15:47
Speaker 3: certainly is something that is an area of focus. But
15:52
Speaker 3: I just don't really see any reason why Chuck we
15:55
Speaker 3: would hit a more robust housing market this year or
15:58
Speaker 3: any conditions have changed.
16:00
Speaker 2: So it's kind of this dance between all of these
16:03
Speaker 2: different factors and that, hey, you will get higher interest
16:06
Speaker 2: rates and you say, okay, that's gonna depress home prices
16:09
Speaker 2: all else being equal, But all else isn't equal because
16:12
Speaker 2: higher interest rates also mean that there are now more
16:14
Speaker 2: people that are mortgage locked in their homes who say, gee,
16:17
Speaker 2: if it's gonna be you know, a six and a
16:19
Speaker 2: half percent mortgage to go buy a new place, I'm
16:22
Speaker 2: not gonna do it, whereas when it was you know,
16:24
Speaker 2: high fives, maybe I'll list my place. So instead you
16:29
Speaker 2: see less supply coming on the market, and because of that,
16:32
Speaker 2: maybe prices can hold up better because there's less supply
16:35
Speaker 2: that is out there. But then you look at the
16:38
Speaker 2: other piece, which is, hey, most buyers in this market
16:42
Speaker 2: are also sellers of another property. Most are not first
16:45
Speaker 2: time home buyers. That percentage is lingering around thirty percent still,
16:49
Speaker 2: and so it's okay, if fewer people are listing, then
16:53
Speaker 2: those are fewer potential buyers to come into the market
16:56
Speaker 2: as well, and so does that end up depressing prices.
16:58
Speaker 2: So it's it's this dance between all of these different
17:01
Speaker 2: factors that you try to look at. And the one
17:04
Speaker 2: thing that I can tell you anyone who works in
17:07
Speaker 2: the housing industry, when they see mortgage rates moving up
17:09
Speaker 2: half a percent in a month, they undoubtedly go, oh, no,
17:15
Speaker 2: like this is this is not what we want to see,
17:17
Speaker 2: especially this time of year. It's one thing if you're
17:20
Speaker 2: seeing this in December, the number of transactions that close
17:25
Speaker 2: in December relative to April and May, it's about fifty
17:29
Speaker 2: percent as much like that's the scale of the difference
17:33
Speaker 2: that you see on a weekly basis. In May and April,
17:38
Speaker 2: you're seeing anywhere from like seventy to ninety thousand closings
17:40
Speaker 2: a week. In December, you're seeing like thirty to forty thousand, right,
17:44
Speaker 2: And so it's just not the same, whereas now it's like, oh,
17:48
Speaker 2: is this going to be, you know, a bigger problem.
17:50
Speaker 2: So we'll see what happens there. Kb Home, one of
17:53
Speaker 2: the nation's bigger home builders, they did give some new
17:58
Speaker 2: guidance in that they expect their revenue to be significantly
18:03
Speaker 2: lower than they were previously guiding on the low end.
18:07
Speaker 2: They're now saying revenue is going to be about five
18:09
Speaker 2: percent five to six percent below expectations. On the high
18:12
Speaker 2: end about ten percent below, So you're talking like a
18:15
Speaker 2: five to ten percent lower revenue number four KB home
18:20
Speaker 2: than they had previously indicated. And I think it speaks
18:24
Speaker 2: to the challenges that home builders are dealing with. And
18:26
Speaker 2: this is before you even get to you know, some
18:29
Speaker 2: of the new questions about input pricing and things like
18:32
Speaker 2: that that are going to develop over the course of
18:34
Speaker 2: the spring. Because remember, the homes that are you know,
18:38
Speaker 2: a quarter of the way done, are already in progress
18:40
Speaker 2: right now. They may already have you know, the materials
18:43
Speaker 2: under contract and being delivered. The ones that are starting
18:47
Speaker 2: in the next couple of weeks, those are the ones
18:49
Speaker 2: where they might not have contracted for you know, specific
18:52
Speaker 2: product and services yet, depending on you know, your subs
18:55
Speaker 2: and how they manage it, and so what do those
18:58
Speaker 2: prices look like and how does it effect construction? Those
19:02
Speaker 2: are big questions out there. Yeah.
19:03
Speaker 3: KB home is a build to home. They build their
19:06
Speaker 3: homes after securing the sales, so they have a unique
19:11
Speaker 3: perspective in that they see that demand earlier.
19:15
Speaker 2: So that's what's going on with housing at the moment.
19:18
Speaker 2: Markets remain positive, but a little bit off the highs,
19:21
Speaker 2: but quite volatile from minute to minute. Here we'll take
19:25
Speaker 2: a quick break. When we return, We've got the trivia
19:28
Speaker 2: answer in Wall Street.
19:29
Speaker 1: Watch, bringing the latest financial news straight to your radio.
19:44
Speaker 1: Every day. It's the Financial Exchange on the Financial Exchange
19:48
Speaker 1: Radio network. Right out full Wall Street Watch treking the stocks,
19:54
Speaker 1: the data, and the headlines driving markets so far today
19:58
Speaker 1: right here on the Financial Exchange Radio.
20:00
Speaker 4: Equity markets are hired by seeing some volatility is there
20:03
Speaker 4: is cautious optimism that the US in Iran may be
20:06
Speaker 4: inching closer to a resolution after the US in Iran
20:10
Speaker 4: a fifteen point plan two end the war. Right now,
20:13
Speaker 4: the Dow is up over three quarters of a percent,
20:16
Speaker 4: or three hundred and fifty three points. SMP five hundred
20:19
Speaker 4: also up about three quarters of percent, NASDAC up over
20:22
Speaker 4: one percent higher or two hundred and thirty four points,
20:25
Speaker 4: RUSSE two thousand up about a half a percent. Tenyre
20:28
Speaker 4: trades are Reel down seven basis points at four point
20:31
Speaker 4: three one six percent, and creude oil down about three percent,
20:35
Speaker 4: trading right around eighty nine dollars a barrel. Shares and
20:38
Speaker 4: chip maker arm Holdings rallying twenty percent after the company
20:42
Speaker 4: unveiled its first in house chips, saying it would generate
20:45
Speaker 4: fifteen billion dollars in revenue by twenty thirty one. Elsewhere,
20:50
Speaker 4: Murk agreed to buy biopharma company Turns Pharmaceuticals for fifty
20:54
Speaker 4: three dollars per cash per share in cash, valuing the
20:58
Speaker 4: company at six point seven billion dollars. According to The Information,
21:02
Speaker 4: SpaceX could file for an IPO as soon as this week.
21:05
Speaker 4: EchoStar shares arising twelve percent on that news, as the
21:08
Speaker 4: satellite communications provider has a near three percent stake in SpaceX,
21:14
Speaker 4: and CNBC is confirming that Meta is laying off several
21:17
Speaker 4: hundred employees today across several different organizations within the company,
21:22
Speaker 4: including Facebook Global Operations, recruiting, sales, and its virtual reality division,
21:28
Speaker 4: Reality Labs. The Information was the first to report the cuts.
21:32
Speaker 4: MetaStock is up about one percent on that news. I'm
21:36
Speaker 4: Tucker Silva and that is Wall Street Watch. On the
21:38
Speaker 4: previous segment, we asked you the trivia question what is
21:42
Speaker 4: the current monthly price of Apple TV? That will be
21:46
Speaker 4: twelve dollars in ninety nine cents. Jason from Kingston, New
21:50
Speaker 4: Hampshire is our winner today, taking on a Financial Exchange
21:54
Speaker 4: Show t shirt. Congrats to Jason. We play trivia every
21:57
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22:01
Speaker 4: at Financial Exchange Show dot Com.
22:04
Speaker 2: Got a piece here in the Financial Times. It's called
22:07
Speaker 2: it's titled want to Hedge? Start with yourself?
22:13
Speaker 1: Look at yourself? Man?
22:14
Speaker 2: Yeah, What's what's this mean, Paul? How do I hedge myself?
22:18
Speaker 3: Basically, what it means is, oftentimes when you have market volatility,
22:22
Speaker 3: questions will arise what should I do with my portfolio?
22:27
Speaker 3: And the answer isn't the same for everyone. And I
22:29
Speaker 3: actually was posed this question recently by a client, the
22:32
Speaker 3: same thing. I'm looking at retiring at the end of May.
22:35
Speaker 3: What should I do to change my allocation and my portfolio?
22:40
Speaker 3: And what I said to the client was, there's not
22:43
Speaker 3: We need to sit down and examine what your income
22:46
Speaker 3: needs are going to be in retirement before we just
22:48
Speaker 3: blindly make a change to your portfolio. And as a
22:51
Speaker 3: result why we had we had a meeting and we
22:56
Speaker 3: determined this is the amount that's going to need to
22:58
Speaker 3: come out of the portfolio from with perspective, let's build
23:01
Speaker 3: in some mechanisms and take some risk off of your
23:05
Speaker 3: portfolio so that we can facilitate those withdrawals on an
23:09
Speaker 3: annual basis over the next period of years, so that
23:12
Speaker 3: not all of your money is subject to equity risk.
23:16
Speaker 3: But that can be different for everyone. That doesn't mean
23:19
Speaker 3: that that situation bodies what everyone should do. There may
23:22
Speaker 3: be other investors out there who have a significant nest
23:27
Speaker 3: egg saved up and they don't need to deviate from
23:30
Speaker 3: their portfolio at all. And in particular, one question that
23:32
Speaker 3: arose when we were talking about hedging is how do
23:35
Speaker 3: you hedge the portfolio?
23:36
Speaker 2: Right?
23:37
Speaker 3: I mean there you can shift it to You could
23:39
Speaker 3: shift stocks to bonds, but there is risk that present
23:42
Speaker 3: themselves with bonds. Twenty twenty two is an example of this,
23:45
Speaker 3: where interest rates on the longer end of the curve
23:48
Speaker 3: went up in the shorter end too, but bondholders found
23:51
Speaker 3: themselves in a difficult position as interest rates rose, the
23:55
Speaker 3: value of their bonds went down. So all of those things,
23:58
Speaker 3: the same thing applies if you're looking to edge with
24:00
Speaker 3: gold too. You have to be aware of what the
24:04
Speaker 3: draw downs are on each hedge to you're examining, and
24:08
Speaker 3: these get really put into focus when you have times
24:11
Speaker 3: of market volatility. Is where to divert assets, but you
24:14
Speaker 3: have to make sure it makes sense for your situation.
24:17
Speaker 2: I think the framework that I tend to work from
24:22
Speaker 2: that that that I find useful is every everyone wants
24:30
Speaker 2: to have, like the hedge that always performs, which doesn't exist.
24:35
Speaker 2: First of all, but also you have to remember that
24:37
Speaker 2: the whole point of diversification is that it's designed in
24:43
Speaker 2: theory to mean that over any particular period in time,
24:48
Speaker 2: you don't have either the best returns or the worst.
24:53
Speaker 2: Diversification is not something where you say, well, I'm diversified,
24:56
Speaker 2: so I'm gonna have like great returns. No, that's that's
24:58
Speaker 2: not what it does. True diversification in a perfect sense
25:03
Speaker 2: is one where, hey, when things aren't going well, you're
25:07
Speaker 2: doing less not well. It's a technical term. When things
25:12
Speaker 2: are doing well, you're doing less well because the stuff
25:16
Speaker 2: that keeps you from doing, you know, too badly when
25:19
Speaker 2: things are falling apart generally doesn't do great when things
25:22
Speaker 2: are rallying. And I find it, you know, it's not
25:26
Speaker 2: just about looking at this in the context of an
25:29
Speaker 2: investment portfolio. It's in terms of look financial planning at
25:34
Speaker 2: its core is all about matching assets to liabilities and
25:37
Speaker 2: when they're going to show up. And so if you
25:40
Speaker 2: have you know, expenses that you know you're gonna have
25:43
Speaker 2: coming off of, you know, cash needs in the next
25:46
Speaker 2: one to three years, if you can say, look, I've
25:48
Speaker 2: got this set aside and in you know cash, such
25:51
Speaker 2: that what the market does is a non factor, then
25:54
Speaker 2: that does a lot to just you know, ease your
25:56
Speaker 2: mind in terms of, hey, do I need to do
25:58
Speaker 2: anything in terms of hedging my broader portfolio or setting
26:02
Speaker 2: it up a certain way, Because it's not just the
26:05
Speaker 2: money that's in there that matters, it's you know, what
26:07
Speaker 2: other assets are there. You can look at this another context, Hey,
26:10
Speaker 2: I've got a property that I'm gonna be selling and
26:13
Speaker 2: that's gonna help cover my expenses over the next couple
26:15
Speaker 2: of years because of the cash that I get off
26:17
Speaker 2: of it. Yeah, those kinds of things matter as well.
26:20
Speaker 2: So it's not just hey what do I have in
26:22
Speaker 2: the IRA or what do I have in the you know,
26:24
Speaker 2: the brokerage account. It's hey, what does my total financial
26:29
Speaker 2: picture look like? And that can help you to make better,
26:32
Speaker 2: more informed decisions about these kinds of things. Folks. If
26:36
Speaker 2: you're looking to help answer these questions, if you're a
26:39
Speaker 2: little bit stressed about what's going on, and you're like, uh, Chuck,
26:43
Speaker 2: I need some help, and I don't want my hair
26:45
Speaker 2: to look like yours because your hair sucks, Chuck, like,
26:47
Speaker 2: please help me? Yes, Like we can do that. We
26:50
Speaker 2: can't help with hair loss, We don't do that. But
26:53
Speaker 2: the Armstrong Advisory Group can help you to sort through
26:57
Speaker 2: your portfolio, sort through your financial planning, and take some
27:01
Speaker 2: stress off your plate and put it onto ours. That's
27:05
Speaker 2: what we do. Phone number to call schedule time to
27:09
Speaker 2: chat with someone from our team eight hundred three nine
27:12
Speaker 2: three for zero zero one Again eight hundred three nine
27:16
Speaker 2: three four zero zero one. You can also go to
27:19
Speaker 2: Armstrong Advisory dot com. There's a button there right at
27:21
Speaker 2: the top. It says get started. You can schedule time
27:24
Speaker 2: to chat with someone to write online there again. That
27:26
Speaker 2: phone number is eight hundred three nine three four zero
27:30
Speaker 2: zero one, or you can go to Armstrong Advisory dot com.
27:34
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
27:37
Speaker 1: registered investment advisor. Nothing in the ad or in any
27:39
Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
27:42
Speaker 1: your own financial, tax into state planning advisors before making
27:45
Speaker 1: any investment decisions Armstrong may contact you to offer investment
27:48
Speaker 1: advisory services.
27:50
Speaker 2: Paul, there's a piece here in the Wall Street Journal.
27:53
Speaker 2: It's titled They're Rich but not Famous, And there's suddenly everywhere,
27:56
Speaker 2: and there's just a great stat here that I think
27:59
Speaker 2: encompasses there's a lot of you know, kind of what's
28:01
Speaker 2: going on in the world right now. They're about four
28:05
Speaker 2: hundred and thirty thousand US households. We're thirty million dollars
28:09
Speaker 2: or more. It's not the full sentence, but I'm just
28:12
Speaker 2: gonna stop it there, because ultimately, like we talk about
28:15
Speaker 2: like the ultra high net worth and their impact on
28:19
Speaker 2: the economy, and I'm more convinced than ever that it's
28:22
Speaker 2: not just like this ultra high. But even you know,
28:25
Speaker 2: I don't know how many households are worth you know,
28:27
Speaker 2: ten million or more, but even like those matter in
28:30
Speaker 2: ways that I think it's kind of hard for us
28:32
Speaker 2: to understand, because when you hear about like the top
28:35
Speaker 2: one percent, there's about one hundred and sixty million households
28:39
Speaker 2: in the country, somewhere in that ballpark. Top one percent
28:42
Speaker 2: means one point six million households, And the problem is
28:47
Speaker 2: that for ninety nine percent of us, we don't have
28:52
Speaker 2: the resources to compete with that top one percent, which
28:54
Speaker 2: means that if they want to go to Disney or
28:58
Speaker 2: a Red Sox game, or they want to go to
29:00
Speaker 2: the Grand Canyon, or they want to travel to Europe,
29:03
Speaker 2: they're willing to pay more than everyone else. And it's
29:08
Speaker 2: one thing when that top one percent is seven hundred
29:14
Speaker 2: thousand households like it was twenty five years ago because
29:16
Speaker 2: the population was smaller, But when you're dealing with finite resources,
29:20
Speaker 2: like think about just we run our show from New England.
29:25
Speaker 2: The main thing that people love to do in New
29:26
Speaker 2: England in the summer, Yeah, we want to go to
29:29
Speaker 2: the lake of the beach. We want to go near
29:32
Speaker 2: some water. It cools us down when we get too hot.
29:36
Speaker 2: You can't build more beach or lake. It's not really possible.
29:41
Speaker 2: I mean it is, but it doesn't go well. Like
29:43
Speaker 2: the ocean eats the extra beach and you know, so
29:45
Speaker 2: on and so forth. There are more wealthy people now
29:49
Speaker 2: competing for the same finite resources that everyone else likes
29:53
Speaker 2: to enjoy. And I think this is part of the
29:56
Speaker 2: reason why like the world feels like you can do
30:00
Speaker 2: what you used to is because it used to be Hey,
30:03
Speaker 2: I'm driving up to you know, Lake Winnipesaki. Year, I'm
30:07
Speaker 2: going to you know, Lake Sunapee up in New Hampshire.
30:09
Speaker 2: And you know, they weren't crowded, they weren't expensive, And
30:12
Speaker 2: now everyone in their grandmother piles in to try to
30:16
Speaker 2: get like those prime weeks and it's like, man, I
30:18
Speaker 2: can't go there like I used to as a kid.
30:20
Speaker 2: It's too expensive. And some of this is is wealth inequality,
30:27
Speaker 2: but a lot more of it is just there's just
30:29
Speaker 2: way more people out there that have those crazy levels
30:33
Speaker 2: of wealth, and there still is only one Lake Winnipesake.
30:36
Speaker 2: There's one Disney World, there's one Yankee Stadium, there's one
30:40
Speaker 2: Yosemite National Park, and you just have more people trying
30:44
Speaker 2: to do these things. It's applying demand, and.
30:46
Speaker 3: In particularly the reason for all that wealth is markets
30:50
Speaker 3: that have performed tremendously over the course of the last
30:52
Speaker 3: decade or so, with the S and P five hundred
30:54
Speaker 3: tripling over the last decade.
30:56
Speaker 2: And if you look at that top.
30:58
Speaker 3: One percent or even you know, the the zero point
31:00
Speaker 3: one percent of the top one percent, close to three
31:03
Speaker 3: quarters of their wealth is tied up in corporate corporations
31:07
Speaker 3: like stocks mutual funds.
31:09
Speaker 2: Or private businesses.
31:10
Speaker 3: All of those have seen their valuations sore significantly over
31:13
Speaker 3: the course of the last decade. So it's added more
31:16
Speaker 3: people on that list, creating a really significant population that
31:21
Speaker 3: has a lot of dough and a lot of demand
31:25
Speaker 3: to spend it, which can hurt those other people who
31:27
Speaker 3: are trying to compete in the same waters as them.
31:30
Speaker 2: Let's take a quick break. When we come back, we'll
31:33
Speaker 2: do a little thing we like to call stack roulette.
31:37
Speaker 1: Follow the Financial Exchange Show on Instagram and see what's
31:41
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31:56
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32:38
Speaker 2: Paul for stack Roulette. I want to talk about this
32:40
Speaker 2: piece from the New York Times, the lines, the prices,
32:42
Speaker 2: the anxiety. Can air travel get any worse? The answer
32:45
Speaker 2: is yes, it can always get worse. And I maintain
32:49
Speaker 2: actually that look, I know that no one likes to
32:51
Speaker 2: wait in you know, a three hour security line, and
32:55
Speaker 2: no one likes to see. What's going on with airfares
32:57
Speaker 2: right now is you know, jet fuel prices have gone
32:59
Speaker 2: up significantly in the last couple of weeks. But I
33:04
Speaker 2: maintain that air travel, for all of the problems with it,
33:08
Speaker 2: it's still a pretty miraculous, Like it's a pretty amazing
33:12
Speaker 2: thing that, you know, we have tens of thousands of
33:17
Speaker 2: flights every day in the US, depending on the day,
33:19
Speaker 2: anywhere from like twenty to forty thousand flights a day
33:21
Speaker 2: in the US. They basically all get where they're going
33:25
Speaker 2: within a few hours of when they're supposed to, except
33:28
Speaker 2: for when they're you know, big weather things that are
33:30
Speaker 2: going on and again. Generally, the safety record is unparalleled
33:36
Speaker 2: relative to any other form of travel out there. And
33:40
Speaker 2: so yes, I get that. If you're you know, trying
33:44
Speaker 2: to shop for you know, in april vacation flight right now,
33:47
Speaker 2: you're like, man, these prices look nuts. Totally get that.
33:52
Speaker 2: If you are listening to us in line at a
33:54
Speaker 2: TSA checkpoint right now, where you've been for the last
33:57
Speaker 2: three hours, I'm sorry, I it's not I can't do
34:01
Speaker 2: anything about it. It's not you know, something I can
34:04
Speaker 2: help with. You can't phone a friend, No, I can't.
34:07
Speaker 2: But ultimately, you ask any of you know, anyone who
34:12
Speaker 2: lived a hundred years ago if they thought any of
34:14
Speaker 2: this would even be possible, and they'd be like, no,
34:16
Speaker 2: that sounds insane. That you can spend like a few
34:19
Speaker 2: hundred dollars to fly three thousand miles over the course
34:23
Speaker 2: of you know, six hours, and you'll get where you're
34:25
Speaker 2: going with basically one hundred percent certainty. That's pretty amazing.
34:29
Speaker 2: So I remain, you know, still pretty in awe of
34:32
Speaker 2: air travel. I know that it's kind of sucky right
34:35
Speaker 2: now because again on a more micro level, Hey, you
34:39
Speaker 2: took three days off and half of one day is
34:41
Speaker 2: you know, chewed up waiting in a TSA line. I
34:43
Speaker 2: get that that kind of sucks, But big picture, I
34:47
Speaker 2: still am very very much kind of that I'm still
34:52
Speaker 2: in awe of air travel overall, even if right now
34:54
Speaker 2: it's it's not good.
34:56
Speaker 3: Chuck, and I was talking up air flying in middle
34:58
Speaker 3: of April. So I do hope that this gets resolved
35:02
Speaker 3: within the next week or so because TSA workers have
35:05
Speaker 3: been without pay for five weeks during this partial government shutdown,
35:09
Speaker 3: and they've called out record rates and more than four
35:12
Speaker 3: hundred and fifty of quid, and I recall on a
35:14
Speaker 3: prior show we looked at just what compensation that they
35:17
Speaker 3: get typically, and I believe around the Boston area where
35:21
Speaker 3: we broadcast out of the average salaries around sixty thousand.
35:24
Speaker 3: So these are people who really can't go without missing paychecks.
35:27
Speaker 3: And this is on the backs of a government shutdown
35:30
Speaker 3: earlier this year that had those people without paychecks for
35:33
Speaker 3: a pretty substantial period of time. So hopefully this can
35:36
Speaker 3: be resolved in short order here for all of us
35:40
Speaker 3: who are flying over the course of the next month
35:42
Speaker 3: or so. As April break approaches, Chuck, I want to
35:45
Speaker 3: talk a little bit about open ai and Soro Video,
35:49
Speaker 3: which is now no more. Open Ai had released Sora,
35:54
Speaker 3: which was a AI video generation app that had come
36:00
Speaker 3: out I believe it was in December of twenty twenty four,
36:03
Speaker 3: but just last night the news was announced that they
36:06
Speaker 3: will no longer pursue this video app and try to
36:10
Speaker 3: focus more on the business side thing. It's interesting because
36:13
Speaker 3: Anthropic has made much more headwinds in business case use,
36:17
Speaker 3: and it was always the view that open ai and
36:19
Speaker 3: chat TBT would sort of be the consumer side of things,
36:22
Speaker 3: but now a lot of sentiment from open ai coming
36:24
Speaker 3: out there more focused on the business sized thing, clearly
36:28
Speaker 3: trying to strive for profitability or not becoming profitable, but
36:32
Speaker 3: growing their profitability by getting rid of initiatives that aren't
36:37
Speaker 3: making them any money.
36:38
Speaker 2: Yeah, And I think the latter piece is the big thing,
36:41
Speaker 2: which is look in order for open ai to make,
36:45
Speaker 2: you know, a ten second video of.
36:49
Speaker 3: A costume, yeah, dressed up like Woody, because that's what.
36:53
Speaker 2: They In order for them to do that, it takes
36:55
Speaker 2: a ton more compute than to you know, answer a
36:59
Speaker 2: few simple questions or even you know, run some kind
37:01
Speaker 2: of agentic AI script. So it's just the sheer like here.
37:06
Speaker 2: Here's the way I look at it. If you have
37:07
Speaker 2: a computer at home, go into you know, whatever your
37:11
Speaker 2: file explorer is, and look at how big a word
37:13
Speaker 2: document is in terms of size, and then look at
37:16
Speaker 2: how big you know, uh, Independence Day is the movie
37:21
Speaker 2: in terms of size, and you're gonna be like, oh gee,
37:24
Speaker 2: Like yeah, I didn't realize that, you know, two hours
37:28
Speaker 2: of videos two gigabytes, and yet two hundred pages of
37:31
Speaker 2: text is like three megabytes. It's just video. There's so
37:35
Speaker 2: much data that needs to be stored there. And so
37:38
Speaker 2: I think this very much is open AI trying to
37:41
Speaker 2: figure out, hey, can we you know, cut the cut
37:44
Speaker 2: the expense rate that we have as far as you
37:46
Speaker 2: know how much we're running up on you know, computing costs,
37:50
Speaker 2: and redirect that into something that we can actually charge for,
37:54
Speaker 2: that people will pay for and that can be profitable.
37:57
Speaker 2: So I think that's very much what is going on here.
38:02
Speaker 2: As we wrap things up for the day, markets remain
38:04
Speaker 2: in positive territory. Major industries up anywhere from about two
38:08
Speaker 2: thirds of a percent to five six of a percent.
38:11
Speaker 2: We don't often reference sixth of a percent, but we
38:13
Speaker 2: did today, and so tune in tomorrow and who knows
38:16
Speaker 2: what will reference then that we never have before.